Cryptocurrency: What Exactly Is It?
Cryptocurrency is a word that seems to be on the lips of many analysts, investors and journalists at the moment. But what exactly is it, and what opportunities does it hold for savvy traders and investors who are looking for a new opportunity? In essence, cryptocurrency is just another way to make purchases. However, instead of being powered by printed money or managed entries on bank account records, it’s instead powered by a decentralised electronic ledger that records transactions and allows the buyer to access their cryptocurrency without having to reveal their identity.
How Does Cryptocurrency Differ From “Real” Currency?
Fundamentally, cryptocurrencies are not all that different to the dollars, yens and pound sterlings of this world in that they can be used to buy products, services and commodities. Yet, cryptocurrencies and real-world currencies are different, too. The asset is entirely digital, and it operates purely through the internet. Cryptocurrency assets are also highly anonymous; it’s very difficult to link a transaction on a blockchain ledger, the technology that powers a cryptocurrency, to the owner’s identity, and all sales and transactions are made between online addresses rather than between more identifiable pieces of information. It’s also decentralised, too, which means that there’s no central authority governing it – unlike real-world currencies, which are managed by governments and central banks.
Need to Know: Key Crypto Facts
Before getting started as a cryptocurrency trader, it’s a wise idea to familiarise yourself with as much information as possible about crypto and how it works. It’s important, for example, to note that there’s no central authority at work in the world of cryptocurrencies. Each one is self-regulated by the people who use it, and that means you don’t have to look out for the impact of any central bank decisions in the way you would have to when trading real world currency.
Crypto History: A Short Summary
Cryptocurrencies have rarely been out of the news in the last year or two, but the history of crypto as a concept is actually a little older than many people might expect. One of the first cryptocurrencies was created in the 1980s, when a computer science expert named David Chaum designed an anonymous payments system which used some of the key features that now identify cryptocurrencies as we know them today. It was during the 1990s that awareness of the power of cryptocurrency began to spread, and in this period everyone from governmental organisations to analysts began to write about the potential that the technology might hold.
- Concept first developed in the 1980s
- Gained traction throughout the 1990s
- Breakthrough by Satoshi Nakamoto in 2009
- Now over 1,000 cryptocurrencies in existence
The first actual cryptocurrency, in the sense of a decentralised exchange network, is believed to have been Bitcoin itself, which was first seen in 2009 when it was invented by a developer who goes by the name of Satoshi Nakamoto. Whether or not Satoshi Nakamoto is a single individual or the name refers to a collective is unknown, but it was thanks to them that this cryptocurrency began to gain traction. Now, there are believed to be well over one thousand cryptocurrencies in existence, with other major names on the scene including Ethereum, Ripple, Dash, Litecoin and more.
Crypto and the Regulators
Given that the first major cryptocurrency didn’t enter mainstream consciousness until less than ten years ago, national governments haven’t quite caught up with the potential that cryptocurrency trading has to offer just yet. At the moment, trading cryptocurrencies isn’t as heavily regulated as trading real world financial instruments is. In Britain, for example, it wasn’t until earlier in 2018 that the regulator, the Financial Conduct Authority, announced that it would begin to insist that providers of crypto derivatives and tokens would have to seek permission in order to operate some parts of their businesses. However, that may all be about to change. Governments and regulatory bodies around the world are now starting to catch up with the way in which crypto is changing the trading scene.
Purposes of Crypto: Wealth and Purchasing Power
The first main group of cryptocurrency purposes are those relating to direct money management and wealth creation. Many people buy cryptocurrency with the express purpose of allowing the value of it to grow to a point where it can be sold at a higher price than the one it was bought for. In this way, it resembles the common purchase practices of any other currency, commodity or share, but the excitement and hype around many leading cryptocurrencies can lead traders to opt for these rather than the well-established real-world instruments.
Purposes of Crypto: Social Benefits
Cryptocurrencies also have another distinctive benefit. As well as providing financial services, they can also provide social ones as well. The technology behind cryptocurrencies is regularly used to reach specific social ends that aren’t as easy to achieve with traditional, real-world currencies. In New York, for example, the Brooklyn Microgrid system provides a way for people who possess solar panels to sell credits to those who don’t have them and link up the electricity meters of participants in a safe and simple way. From the point of view of a trader, this sort of use case might seem like a less relevant purpose than the wealth and finance functions of crypto.
- Cryptocurrencies are often used to achieve social ends as well as financial and wealth-related ones
- Environmental and community causes are popular
- Diverse use cases create a virtuous cycle for scheme creator, community user and cryptocurrency trader
However, it’s actually important to take the social users of cryptocurrencies into account too, even if they’re using their tokens for slightly more community-minded reasons, these people are still boosting the value of the cryptocurrency. Traders should also keep an eye on which exact cryptocurrencies are being used in this way. When a new social scheme chooses a less well-known cryptocurrency to power a community project, for example, it could act as an early warning sign that the cryptocurrency in question is about to go big.
What Does Crypto’s Future Hold?
At the moment, the cryptocurrency market is largely retail in nature, which means that the majority of the investment which funds and fuels it is carried out by individual people rather than organisations such as banks or investment funds. However, with organisations now working on ways to ensure that any potential cryptocurrency investments they make are as safe as possible, it’s likely that there’ll be a breakthrough, and from there we could start to see large-scale investments in specific cryptocurrencies and the technologies behind them. For those who plan to trade cryptocurrency, it’s important to remember that there may well be some market movements on the horizon in the coming years.
What Our Guides Can Offer
Cryptocurrency is clearly an exciting and innovative way to do everything from boost communities to work towards a world in which finance and payments are decentralised and safer. However, there’s so much more to cryptocurrency than this, and it’s a vast and diverse world with all sorts of different tendencies and modes of operation. As a result, we’ve developed lots of cryptocurrency information designed to help you learn all about how to get started in the cryptocurrency universe, and how to make your way from novice to successful trader. Our crypto guide can tell you, for example, the best ways to analyse crypto charts filled with historic market data that may be useful for making decisions about future trades.
- Our guides offer information on chart analysis
- Info on how to set up accounts on offer
- Payment methods and other admin matters discussed
Our crypto guide can also point you in the direction of some handy crypto trading strategies designed to give you the best possible chance of making a profit, while they can also explain how you launch the complex process of carrying out a basic crypto broker comparison then using the findings to select the best crypto broker and signing up for their services. They can also provide you with the sort of handy administrative information that is essential for anybody who wants to get started in the cryptocurrency world, such as how crypto assets can be paid for.
The Cryptocurrency Story for Traders
The cryptocurrency world is a fascinating one, and from the interesting history it has enjoyed over the last few decades to the many different uses that crypto investors have found for it, it’s clear to see why so many people flock to it. It’s also something that offers great potential for traders. It’s versatile enough to be traded both in an asset sale fashion as well as through a CFD, and the decentralised nature of it means that there’s a whole host of cryptocurrencies to trade.